Gundlach: As in Japan, Dividends May Not Beat Bonds

By Michael Aneiro

With dividend stocks offering better yields than many types of corporate bonds, and certainly better than Treasuries, a lot of investors are taking this as a no-brainer that dividend stocks are certain to outperform bonds, particular given their potential for capital gains.

Not so fast, says DoubleLine bond guru Jeff Gundlach, currently in mid-conference call. Gundlach points U.S. investors toward the example of Japan (as Barron’sdid this week). Since the end of 2009, Gundlach says, dividend yields have been higher than Japanese bond yields, but during that time the main Japanese bond index has returned around 6% while Japanese stocks have returned negative 6%.

“It’s no guarantee that a stock portfolio that has a certain dividend even has to outperform a government bond,” Gundlach says.

Amey Stone is Barron’s Income Investing blogger and Current Yield columnist. She was formerly a managing editor at CBS MoneyWatch, MSN Money and AOL DailyFinance. Her responsibilities included overseeing market coverage and personal finance topics. Prior to those roles, she was a senior writer at BusinessWeek where she authored the Street Wise column online and contributed to the magazine’s Inside Wall Street column. Topics covered included economics, corporate finance, Fed policy, municipal bonds, mutual funds and dividend investing. She co-authored King of Capital, a biography of Citigroup Chairman Sandy Weill. She is a graduate of Yale University and Columbia University’s Graduate School of Journalism.